Why Gold Is The King Monetary Asset, Not Bitcoin

There seems to be a lot of misinformation being peddled on the internet about gold and bitcoin. One major misconception is the notion that bitcoin will replace gold as a monetary instrument. Some analysts, once stanch precious metals advocates now turned crypto aficionados, believe in such theories that there is too much gold in the world to be used as money or that it is now just a barbarous relic. Just a year or so ago, these same supposed analysts were criticizing the Mainstream media financial network talking heads for calling gold as a barbarous relic, but now have jumped on the bandwagon.

Well, in one small way, who can blame them. It has been frustrating holding onto gold and silver patiently waiting for their inevitable rise. So, when Bitcoin and the crypto prices moved up exponentially last year, promising investors vast riches in the future, it was easy for many to drop the precious metals and move into the crypto market. The mindset today is to make lots of money doing nothing. Thus, it’s not surprising to see many fall into this delusion and way of thinking.

A few of the crypto aficionados tell their followers that gold can’t be a monetary asset because there are millions of tons of gold hidden in secret vaults or that there are billions of ounces locked away in the Grand Canyon. While this may sound like quite an interesting conspiracy, there is no sound evidence to back it up. To believe in these fanciful conspiracies defies all logic. However, with logic being in short supply currently, I am not surprised that many believe in these fairy tales.

One of these ex-precious metals, now a highly qualified cryptoanalyst, suggested in a recent video that the “Gold is owned by the Bankers” so why would you want to own gold? Unfortunately, this is a false statement. While the Central banks own a lot of gold, it’s a lot less than what the private investors and jewelry owners hold. According to the World Gold Council, jewelry accounted for the largest stocks of above ground gold at 90,700 metric tons (mt), followed by 40,000 mt of private investment, 32,600 mt of Central bank holdings and 26,700 mt of Industrial usage and other:

Of the total 190,000 mt of the world above ground gold stocks, jewelry consists of 48%, private investment 21%, Central bank 17%, and Industrial and other at 14% (Source: World Gold Council – Total above-ground stocks 2017) So, if we realize that nearly half of all above-ground gold stocks are in the form of jewelry, and then another 21% is owned by private investors, Central banks DO NOT own most of the gold. Even if we compare private investment to Official holdings, private investors own more gold than Central banks.

Now, to the incorrect theory that there are millions of tons of gold in the world, can someone please tell me where all this additional gold came from?? If we understand that the increase in gold mine production paralleled the rise in silver and copper production, how could there be 10-20 times more gold than copper and silver???

First, most of the gold ever mined was produced after 1900:

According to the best data, we can get our hands on, 91% of all gold mined since 1493 was produced after 1900. Limited records of gold produced before 1493 suggest that wasn’t more than 10,000-15,000 mt.

Secondly, if we look at historical world silver production, we see the same pattern:

Of the total 48.5 billion oz of silver mined in the world between 1493 and 2016, 81% of it was produced after 1900. Also, the amount of silver mined annually compared to gold has been about 10 to 1. Assuming that total historical silver production was approximately 55 billion oz compared to 5.7 billion oz of gold, it turns out to be nearly a 10/1 ratio.

For there to be just 1 million tons of gold in above-ground stocks in the world, that would equal 32 billion oz of gold. Considering a 10/1 ratio of silver to gold production, then we should have mined 300+ billion oz of silver, not the 55 billion oz stated by the world authorities.

So, if we understand the logic here, why on earth do people continue to believe in the LOUSY CONSPIRACY that there are millions of tons of gold in the world?? Why, because lousy conspiracies sell a hell of a lot more newsletters and subscriptions than those that put out the facts and fundamentals.

Regardless, Central banks own less gold than above ground jewelry stocks or private investors. While Central banks are controlling the gold and silver prices by funneling 99%+ of investors into stocks, bonds, real estate and cryptos, they cannot manipulate the price of precious metals too far below their cost of production.

Unfortunately, the crypto aficionados do not understand energy or the cost of production as a FLOOR for the gold and silver prices. Which means, the Central banks cannot push the price of gold and silver anywhere they please. What the Central banks CAN DO, is that they can BAMBOOZLE the public in putting their funds into the biggest Ponzi Schemes in history. By funneling the public’s money into stocks, bonds, and real estate, this caps the gold and silver price. This is the manipulation.

Now, the notion that Bitcoin will replace gold as the King Monetary Asset is patently false because Bitcoin fails several important tests. First, Bitcoin trading volatility is too high to be used as a currency. I have heard from several people that using Bitcoin as a payment method is very frustrating because the price can fluctuate $1,000 in a very short time, thus making it a very stressful transaction for both buyer and seller.

If we compare the volatility of Bitcoin versus gold and fiat currencies, Bitcoin is the clear loser:

Bitcoin’s 30-day volatility of 3.73% is nearly 9 times more gold and 10 times more than the USD/EUR (US Dollar-Euro). While Bitcoin’s volatility could continue to decline in the future, it still needs a very high-tech electronic system to allow trade and payment.

Secondly, Bitcoin and cryptos will not function well as the EROI of energy continues to fall, destroying the ability to scale up or maintain high technology. I recently watched a documentary about the Dark Ages on the history channel. After the fall of the ancient western Roman Empire (5th century), people who lived around the once great city in the 6th and 7th century knew that life was better in the past because they saw all these massive buildings and structures, but were now living mostly a peasant’s life.

In just 3-4 generations, people no longer remembered what it was like to live in Rome during its heyday. The great culture, technology, food, and trade of the ancient Roman Empire were gone for good. Most Americans today have no idea what life is like after a collapse of society.

Not only will Bitcoin and the cryptos not survive the coming Falling EROI energy collapse, either will most of the advanced technology. Sure, some technology will be around, but it will claim the same fate as the ancient Roman Empire. For this reason, gold will always remain the KING MONETARY METAL and asset.

Unfortunately, the crypto aficionados do not understand the Falling EROI of energy as they mislead their followers into investing in just another fly-by-night bubble.

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52 Commentson "Why Gold Is The King Monetary Asset, Not Bitcoin"

This long awaited article depicting relative amounts of gold held by banks vs the people shoots my earlier theory to hell about banks trying to , or being able to, corner the amount if gold in circulation to keep the people from preserving enough gold to act as backing for a competing currency not in banks’ control. At best banks may suppress the price but never will they acquire enough to force the people to have to rely on an unbacked system…like BTC.

“The great culture, technology, food, and trade of the ancient Roman Empire were gone for good” : and slavery disappeared in europe then…
In roman times most people were living as peasants and money/exchange was mostly limited to the upper class and the imperial conquests : sounds familiar ?
By the way, the romans citizens (the pleb) cannot legally work (and they surely were not very interested). Production and distribution was completely obedient to social relationships.
It appears to me that you are seeing roman empire with our century eyes but that is not surprising for a TV show…

Again Steve you create a false dichotomy to perpetuate the Gold v Bitcoin meme. They are not in competition. Both performs their function perfectly. Please define “Monetary Asset”. Does that mean I will go into my supermarket and exchange Gold or silver coins for groceries? Does that mean we will use dollars backed by gold? Seems to me that gold and silver stopped being a “monetary asset” when they ended the Bretton Woods agreement in 1971. What that meant was…” the United States unilaterally terminated convertibility of the US dollar to gold, effectively bringing the Bretton Woods system to an end and rendering the dollar a fiat currency”https://en.wikipedia.org/wiki/Bretton_Woods_system
So how do we restart this monetary asset? Gold and Silver haven’t been a monetary asset for 47 years at least since the ending of Bretton Woods. I stopped buying gum and baseball cards with silver since they eliminated silver from our coinage in 1964. In an electronic age it is not practical to exchange actual physical gold or silver for purchases. How do you transfer millions of dollars of gold across the planet? With great difficulty. How do you transfer millions of dollars of Bitcoin across the planet? With great ease.
Gold and Silver will remain a great store of value as they are today and will become an even greater store of value once the manipulation ends.
Gold and silver as a “monetary asset”? No, they are much more valuable as a store of value and silver especially as a strategic metal. As I’ve said before, I don’t want to go into a grocery story and exchange my valuable silver for toilet paper.

Good work GLP and Steve….I am interested to know your feedback mate, as one is real store of wealth and another (cryptos as a general, not BTC only) are (at least seemingly going to be) easy way for day-to-day exchange. We might see BTC as store of wealth too.

Please advise on these two separately….well falling EROI there BUT mankind would still find out ways to drive cars and flying planes, regardless. I am sure you not denying it either.

Great comment GLP. I actually agree with about 75% of Steve’s post. That said… “A Ponzi scheme is a fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns for older investors by acquiring new investors. This is similar to a pyramid scheme in that both are based on using new investors’ funds to pay the earlier backers. For both Ponzi schemes and pyramid schemes, eventually there isn’t enough money to go around, and the schemes unravel.” — Investopedia
Anyone claiming bitcoin is a ponzi scheme either doesn’t know what bitcoin is, or is financially illiterate. Could one say bitcoin is in a bubble or overvalued? Sure (but relative to what?). But that isn’t the same as a ponzi scheme, and to say so is completely disingenuous. See this article for further explanation: https://decentralize.today/bitcoin-is-the-total-opposite-of-a-ponzi-scheme-heres-why-4d795f0ed

Bitcoin vs Gold is a false dichotomy. Stack both. Steve is focused on the energy requirements for bitcoin, and I keep mentioning that crypto 2.0 and 3.0 use other consensus mechanisms like Proof of Stake, dBFT, etc that require very little energy but he keeps ignoring these obvious facts. If the world has enough power to run computers and the internet, there is enough energy to run any PoS crypto.

Well my assumption is that if they (Microsoft & Cisco) ceased to exist due to a lack of profitability, they would be overtaken by companies that are actually profitable that operate in similar markets. But your premise is an odd one in the first place. Bitcoin doesn’t have profits, dividends, etc – it is a currency. What does the USD or euro do when a company in tech goes bankrupt? Nothing special.

The peddlers of LOUSY CONSPIRACIES do not put out facts. Bix Weir is probably one of the analysts doing much more harm than good for his followers peddling his lousy ROAD TO ROOTA theory. Again, HYPE and SENSATIONALIZED Fairy Tales motivate people to listen more because it’s a hell of a lot more exciting than reading or listening to FACTS & FUNDAMENTALS. So, even individuals in the alternative media fall for this crap.

Lastly, these guys would never debate me because they don’t understand that ENERGY is the FOUNDATION of everything. Also, they do not have the ability to CONNECT THE DOTS. Lousy Conspiracies can easily be disproven, while real conspiracies take a lot of effort and work to prove they are possible.

Lol, sorry, I had to laugh Steve. I do listen to Bix, now and then but I do not put a lot of stock into what he says…especially the Grand Canyon gold theory. I guess At this point I do not want to put all my eggs in one basket, who knows what these a-holes will think of next to screw us.

Steve
I was preparing my charts for trading and noticed something quite odd. Check out this chart I screen shot on silver http://learnpowertrader.weebly.com/ and note the volume in the latest diminishing triangle. It is as high as what propelled it to 50 bucks only constant and with very little price action.
Thought you might be interested

I just posted this in response to the GoldSilver article entitled, ‘Are Crypto Currencies The Future Of Money’:

Maloney has made it his mission for many years to point out that paper/digital money backed by nothing is a Ponzi scheme. This is his premise for constantly claiming the only sound money is gold and silver. How can he endorse any Crytpo money when none have any physical gold or silver backing? In other words, while rightly denouncing the present bankster paper money Ponzi scheme (which is on its last legs), he is now advocating Crytpo currencies which are also nothing more than a Ponzi scheme. He must be aware that Goldman Sachs and JP Morgan have invested millions into the Crypto circus. He must be aware that just about every CB is salivating at the thought of cashless societies, all using a Crypto currency. Does Mr Maloney seriously think that the huge Towers of Usury will just stand back and ever let Main St be free of them? If so then he needs to see a psychiatrist. It is so obvious that once Banksterville can invent a blockchain that can work for Main St. citizens of all major nations will then be chained to government sanctioned, bankster block chains. This is going to be their next monetary Ponzi scheme for Main Street. Private Cryos will be outlawed by the banksters bought out political puppets. Bankster run Cryptos will be the final end of our financial freedom. I am saddened that Mr Maloney doesn’t have the integrity to warn his readership of this.

He doesn’t think they will just sit back and allow it. The gobberment outlawed booze in the early 1900’s…did that stop us? Marijuana was illegal for what seems forever…did that stop us? I could go on with these.
The two things that most people are forgetting is 1) most cryptos are inflationary, therefore it does not take the greater fool theory to make your crypto more valuable. Are there crappy cryptos, absolutely, and they will fall to the wayside. And they do not really fit the meaning of a ponzi scheme. 2) Anything can be used as money as long as people agree on it.
You and most people here can hold your breath waiting for cryptos to go away but I’d be willing to bet the family jewels that at least some will be here long after were gone. Will Bitcoin be the top dog, probably not, but it isn’t wise to count them out in the future. I have watched Maloney for years and yes he has also mentioned (warned) about bankster run cryptos

Anything can be used as “currency” if people tolerate it. “Store of value” feature of sound money is not required. Well-read people will use the currency to save in pm’s (even if it is over-regulated or actually unlawful) or invest in productive assets to multiply their wealth.

Your premise is essentially correct and incorrect at the same time.
Though gold is portable real estate, and under control of the title of King/Queen, the Crown Corporation of London, a sub Corporation of the Crown Corporation of Rome, The Vatican, still, it is only portable real estate as it has always been. It has extremely limited uses; around 100. Money, currency, ease of convertibility, flexibility, trade-ability, fluidity, prophylactic are not some of them. Those are properties of silver which has around 10,000 uses and once was worth twice the price of Gold. Gold has no value except under the domain of the true King/Queen consort called Silver.
Gold is not money by any means of measure whatsoever. Nor is BitCoin or any other crypto-currency. They are ‘place holders’, like a house or castle, and not currency as exhibited by their lack of exchange-ability with any other currency, particularly fiat currencies, without high exchange rates/fees. It is difficult to buy anything other than heavily inflated and controlled, so-called assets, with cryptos. You still, in any case if you are making a profit, must assume exorbitant, even confiscatory, tax rates on profits in cryptos which are not themselves accepted by the IRS in payment. Why, oh why, would anyone deal in Cryptos except in ignorance? This is the greatest ponzi in recorded history.
Gold is subsidiary to silver though worth more per ounce, at this time, but only has value if you can secure it, transport it or convert it to another asset like food, water, housing, transportation, communication, or, silver which is convertible anywhere on the planet, anytime, at 90 to 98% of spot, for cash currency, at any refiner, anywhere.
What’s it gonna be punk? Do you feel lucky?
Any serious investor in precious metals must hold, physically, silver in equal dollar value to gold, or he/she is pissing in the wind.
Have a nice shower friends!

Don’t agree with all of your reasons, but do with your conclusion! Silver is a fantastic value for the physical investor at g:s of over 70, cheaper than most mines can get it out of ore-bearing rock. Even better than .999 silver ounces/bars is the wonderfully pre-divided silver of US pre-1965 90% silver coins selling for a few pennies per ounce above spot. Imagine the premium that would have to be placed on a private mint coin that was 1/10th ounce of silver: I would guess $1.00, at least, giving a retail price of ~$3FRN/coin vs. silver dimes (0.0715 ozT each) at $1.25 each. Buy the value in silver, in a form that people understand.

Great stuff, thanks a lot!
Also, Steve, it would be nice if you could put the same metrics in the gold and silver charts – either ounces or (better) metric tons. That way one could see right away that (according to your figures) only 7-8 times more silver than gold was EVER mined and at least half of that silver has been consumed and is gone for good (-> future mining of landfills). Thus, there are less than 4 silver ounces above ground for every ounce of gold.

However, 2 concerns to note. (1) if the media and FI’s are largely responsible for driving people into stocks, bonds, and real estate (thus keeping gold at commidity price levels)….why can’t they flip and drive up the crypto prices once they are bought in — hell of a profit incentive for them to do so. Therefore bitcoin will be the new stocks, bonds, and real estate.

And (2) the logic that bitcoin is not sustainable due to high energy is not true for several reasons — mainly because electricity demand is forecast to drop; miners can move to Iceland or Canada or locations where plants have excess supply but remain online;also need to account for decline in legacy payment technology energy use, which likely uses more; and if they are successful and electricity does become money, it will find a way to stick around.

********FOR THESE REASONS I RECOMMEND A MIXED PORTFOLIO OF PHYSICAL CASH, BITCOIN AND GOLD — ALLOCATION PERCENTAGE BASED ON AGE AND COMFORT LEVEL*******

Good Strategy Josue. Seems that you have all your bases covered. Crypto is risky, I would just add to be careful. It does seem that 99% of all these Cryptos are scams. So just stick with the least scammy coin. That is Bitcoin.

But like you said, allocate based on your comfort level. Always need cash, and keep it outside the banking system so that you are not contributing to their fractional reserve and don’t have to worry about their risk of failure, or ability to get out the cash when you need it most.

Gold is Gold. Nothing more to say, stable, thousands of years of history, can’t go wrong.

I’m super positive on silver. I think Mexico is key to global silver production. There are very powerful headwinds for silver miners that could bring Mexican Silver production to its knees. We have to keep in mind that Mexico is 25% of global silver production.
1. Since 2016 National Petrol prices have risen from .78 cents a liter to around $1.00 a liter. That’s more than a 20% rise in energy input costs across the entire economy.
2. Pemex isn’t replacing oil reserves. They are bleeding money from theft, fraud, and decades of incompetence.
3. The Mexican Peso continues its devaluation against the Dollar. The peso has lost 20% of its value over the last three years.
4. Mexican Presidential elections July 1st. Looks like leftist Candidate will win. He will then need to renegotiate NAFTA.

Just saying..silver might become a lot scarcer in the not too distant future.

Yes, they don’t invest in BUBBLES, only the public invests in bubbles. The wealthy create the bubbles so the public can lose their money. What people don’t realize is that the market is like a CASINO… the house always wins. But, the public doesn’t realize that because they FEEL LUCKY.

First off, you have no clue whether those families have purchased any bitcoin or not. There are OTC bitcoin trades through proxies and there is no public record of it. 50 years from now, you will likely need to add several more families to your “dynasty” list and it will include the Winklevoss twins, Tim Draper, and a few other rich early movers in the crypto space.
Second, these are the types of people who spend $100 million on a piece of artwork or a bottle of wine from 1735 so don’t tell me they wouldn’t possibly invest in something speculative that may or may not turn into a global success in the future.

The normalcy bias is an odd thing among PM stackers. They simultaneously believe we could go back to a pre-internet hard money standard from 50 years ago (which seems quite crazy to me in an online digital world), but also think the idea of a futuristic online currency that solves the double-spending problem is ridiculous and will never take hold… even though a country like Japan has already legalized bitcoin as legal tender. Interesting.

Bitcoin BTC is already a legacy shitcoin. But DAG/tangle blockchains, based on Directed Acyclic Graph design, are free of blocks and free of chains. They do not require any major amounts of energy, and the larger the tangle the quicker the transaction confirmations. In other words, there is next-generation crypto without the energy requirement, and they get faster as they grow, while ANY blockchain of traditional design grinds to a halt eventually. So, no. Bitcoin, no. But super crypto, yes. Superior to gold. Only silver comes close to the best crypto. And there’s enough crypto for the entire planet, not just the privileged geeks with computers like me and you guys.

Money is a commodity. Gold and silver and the receipts therefor are money. Paper or digital currency has no more value than paper wheat or paper pork bellies. Paper and digital currencies will return to their true value of zero, either quickly or slowly. Cryptos as currently constituted are just another form of worthless digital currency. Bix and Andy have fallen for the mass delusions and the madness of crowds.

Andy Hoffmann is probably the biggest threat to PM bulls cognitive dissonance. The guy lived and breathed PMs for over a decade, raging against the institutions that we all despise. He got it. So of course now that he believes in crypto he must have fallen for a mass delusion or the “madness of crowds”. It couldn’t possibly be that he invested the time, did loads of research, and came to a logical conclusion based on all the facts in front of him, especially in light of new information (cryptos are under a decade old).

A rational actor would wonder, what made Andy abandon his life’s work where he was making good money, and fighting for what he believed in, and throw it all away to chase a pipe dream? The obvious response is he is just chasing returns. But if you dare look deeper, and allow your ego the ability to question your initial assumptions, you might find that his decision isn’t all that crazy. But most PM bulls aren’t very open minded so I don’t expect much.

It would make sense that the cb’s would want to keep the price low and make crypto the next fiat. If the world went back to the gold standard the people who hold all the metal for jewelry or private investment would have all the wealth and not the cb’s or the elites associated with them.